China's Alibaba is spinning off its Aliyun OS into a seperate business unit

Days after feuding with Google over its mobile operating system, Alibaba Group said on Thursday it would spin off its Aliyun OS into a separate business unit, and invest US$200 million to back the new venture.

The announcement came from Alibaba Group's CEO Jack Ma in an internal email that was leaked to the media. Alibaba declined to comment, but a source familiar with the matter confirmed its veracity.

The Aliyun OS, developed and originally operated by an Alibaba Group subsidiary called Alibaba Cloud Computing, will now be run as a separate business unit with its own president and chief technology officer. The $200 million investment will go towards improving the Aliyun OS's talent base, technology and infrastructure.

In the email, Ma said the move was being made to secure the "healthy growth" of the OS and implement the company's next step in its wireless strategy.

The Aliyun OS, a Linux-based mobile operating system, was first launched last year as a way to bring more Alibaba-powered Internet services to users and provide a new mobile ecosystem for China.

Last week, however, the operating system met stiff resistance from Google when the search giant accused the Aliyun OS of being an Android variant incompatible with the rest of the Android ecosystem. Caught in the dispute was PC maker Acer, which had originally planned to launch a smartphone using the Aliyun OS, but later decided to cancel its release.

Analysts expect Alibaba's dispute with Google could prevent bigger-name smartphone vendors from using the Aliyun OS. Currently only two local Chinese handset vendors have built handsets using the Aliyun OS as Android continues to dominate China's smartphone market, now with an 81 percent share, according to research firm Canalys.

Alibaba's investment in the Aliyun OS, however, signals that the company has major plans for its mobile operating system. Last year, Alibaba spun off a shopping search engine and a retail e-commerce site into separate companies as a way to help them expand their reach in China.

Jonathan Lu, Alibaba's chief data officer, will lead the new Aliyun OS unit as president. In his duties, Lu will be meeting with hardware vendors to secure business for the Aliyun OS, said a source familiar with the matter.

Increasingly, Alibaba and other Internet firms in China are expanding in the country's mobile Internet space, as mobile phones have become the most popular way for users in China go online. Retail e-commerce sites under Alibaba expect revenues from mobile shopping to explode in the coming years.

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